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KVH Industries (KVHI)

Participants
Roger Kuebel CFO
Brent Bruun Interim CEO
Ric Prentiss Raymond James
Chris Quilty Quilty Analytics
Ryan Koontz from Needham
Call transcript
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Operator

Good day, and welcome to the KVH Industries, Inc., Q1 2022 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Roger Kuebel. Please go ahead, sir.

Roger Kuebel

Thank you, Operator. this thank first joining included quarter earnings we and our today in everyone, release Industries KVH results, published morning, you us for for the Good morning. which are

is Joining me Brent company's Chief Executive Bruun. the on Officer, Interim call the

dive of quick in, announcements. couple a we Before

First, would team. Relations copy like of it earnings release, Investor if available from on our you is our a the website and

available recording would of to today's on like our will it you website. If a be to call, listen

free feel web, submit the via listening are you ir@kvh.com. to to If questions

Finally, subject of call undertake results We expressed will statements. these cause uncertainties that this those contain conference statements. any actual certain to that no statements obligation forward-looking to our and from these are differ to materially numerous update assumptions in revise may or

measures, GAAP well of as you We in find specifically non-GAAP also company's of made definitions The certain comparable measures in information our was XX. in reconciliations to as March the the We statements our will to SEC our measures. discuss directly are filed on release from measures and you'll press cautionary XX-K, website. those encourage review under XXXX non-GAAP financial these available of Form our investor heading SEC which filings Factors other section Risk the filings, these

highlights Now turn to the Brent. walk you quarter, of I'll first to our through the call over

Brent Bruun

large for share. X% quarter to we revenue I'm a a TACNAV Thank to the that first we quarter report million. you, Total several year everyone. of recorded that Roger, happy good order. when from want and positives I was shipped decrease morning, last That's the $XX.X

core our results businesses. TACNAV exclude growth show we sales, in if our However,

up and XXXX. an or core airtime, Without increase year-over-year $X.X adjusted double-digit versus this driven restructuring QX charge, by $X.XX for a TACNAV year. while both last airtime restructuring achieved costs. gross included we our over loss $X.X growth AgilePlans in Consolidated $XXX,XXX we strategic And the our Excluding navigation. million, the portion were and an margins revenue, significant million, of margins sales, quarter of QX increase in share, EBITDA businesses: of inertial was of net had a first

sales into to As we continued a backlog of mobile confidence navigation will That million are is encouraging, issues across these demand I This products. chain strategic shipments connectivity do well core our companies, with here. to have markets our businesses. of strong, continue and to $XX and some our contributed markets. most Overall, supply see inertial continue that and in we to impede

that and short challenge, with personnel. most challenging one our in meant of and expected was to revenue. needed restructuring which our to the expense term effort included This align us we long This to expenses operating led This our we the March. in decision, reduced was Our difficult in decisions model reevaluation personal term. both resulted a our also significant a early most The the of had make has make. to

adjust evaluating to necessary. prices our an committed as and are basis ongoing We on product

that success our where positioned we on XXXX. strategic That long well January. goods. we increased us areas that products to that focusing in in is guided are we incremental increases As refine we May made increased has long-term a group price vision goals of industry It of cost prices select some and for why products is of are By our for commitment, on services term. leaders, to the response of to effective in result X, a

assets divesting with and our on don't of shareholder core We to will the that disciplined our drive focusing value core included ourselves plan by businesses in continuing stay business. Part align and new product by our profitability of initiatives. also

QX. a $XX Other of weeks strategies new ago. benefit an acceleration for buildup This include sale business radio unbudgeted retail As the in our and AgilePlans. example, finalized resulted subscribers X cash of we via million

autonomy a leisure where are an in higher-ARPU industry our also customers value-add. targeting expanding significant and base is We

are these worldwide employees critical Our to achieving goals.

virtually We from are I Island, and core committed Athens, updates Steps to shine; opportunities Middletown, sharing limiting efficiencies product to in or that in include: received on with person I feedback crucial recently Greece, internal to development Rhode listened on region, is have every I our performers employees teams; efforts. highlighting are our our strong. taken the to following disruptions structures we to have restructuring. realign new external weekly we and new star and amongst and gain met Singapore. reporting have keeping successes progress for and

quality, dedication that to It full we make restructuring understand is impact KVH. a superior this my on reinforce I may employees continually what the period and and for: innovation and important stands emphasize our transition service is our brand the customers to not was quarter. until primary our around the to focus I our world. While the road, benefits was service. third commitment The of for to providers an

markets airtime to versus That's forward. I firm a million. in KVH that However, core where plan to show move updates we increased for XXXX. XX% I stand our our confident we ahead. we QX In in a on we and million, value. have revenue our am future how great like connectivity long-term increase quarterly few mobile a believe and business, $XX I'd to I on growth touch know footing and of do, is $X.X what to

active customer the our shipments than was mobile year. $X.X This even last network. satellite up and our shutdown decrease as terminals QX subscriber we VSAT connectivity achieved up of this to legacy a total base. New due of We more growth saw X%, revenue versus in million total was were X%

decline year-end are As in to the part for are systems migrating the slight refit subscribers, HTS anticipated, that with boaters. in due our remaining season dividends. our subscribers of some efforts legacy paying at to Even spring leisure

our to first as award-winning applaud HTS of margins our for network. on as like and are achievement. XXXX That's customers the driven legacy VXX I much revenue elimination QX of market, history. its the as ended network, year expense our almost hardware would VXX serving our Our due from first our to an sequentially product TracPhone are anniversary also we the In terminal. the TracPhone more commercial The airtime incredible VXX and increasing and of successful The AgilePlans most revenue QX our impressive by XX% and VSAT XX% increased from in best-selling accounted VX-HTS. roughly company XXXX. recognize

the availability satellite at select systems components shipments. Looking impacted QX, TracVision limited in of

was diligent dedicated team and build ship. to purchasing Our and

However, we $X.X enter million a with did backlog. QX

our we we several support marine in higher-value, South also is in went there United Eastern Seasonal is airtime products. to service recently are the at Mediterranean The few and streaming and America, are priority States ago, We're are Subscriptions to shipping transport the is also with pleased We're solid April. Caribbean customers regional TV Bahamas to demand QX, in service and for working start in Elite, see also strong, in and a remains partners remained seasonal looking fishing, the our make continued available systems. market launched Canada this [lead] seaboard the components and of the for our service There more live momentum. unlimited service forward, for leisure of forward KVH And river higher-margin countries. Moving serving seasonal significant scope demand our with gaining year. demand expanding efforts communications And and increase days the service. India. which for approved just to our commercial along our satellite business. commercial and of our bookings

QX did military that XXXX. in we XXXX of uncontracted see in of navigation. and did the no TACNAV we Turning unusually QX from of not to year. our last is sales large why guidance. We business declined million This in inertial $XXX,XXX in longer TACNAV our navigation include TACNAV of example inconsistency a revenue QX prime to sales the $X.X of

the increased our However, sales same systems navigation QX OEM of quarter in year. XX% to last inertial compared

chain And Demand as began weapon our issues a as including with steady good many our shipments. in stations remained news? applications, Here as for and well backlog again, systems. supply sensors. million stabilization result, remote roughly impacted products traditional commercial $XX The in platform inertial of we QX

We are are leading very gyro exciting Currently, closely sensors chip-based working we involved fiber for trucking developers. a XX% is Autonomous our are autonomous of which in and revenue. now optic autonomy, is represent in several applications we seeing industry, comprehensive our testing number and in in a critical growing photonic with platforms. momentum a of autonomy inertial of trucking

put with an of decisive against product were We competing steps is of our up report technologies, quarter of Our operations with came challenges. seeing taken to QX the to entered being strength align out positive revenues. We I'm our areas very and they having array thrilled results. and

turn forward look adjustments that to ahead. to that, the profitability. And is over us goal I and to and the grow Our long-term to will it the Roger. and with I'll make year success guide quarter business

Roger Kuebel

Brent. Thanks,

in $XX.X can total product past the TACNAV that mentioned, million, $XX.X mentioned see, a in also, And for that earlier, collectively, last also see of the revenue of Brent you And we compared is this last the we in as in can as was year quarter $X.X mentioned, discussed As our with, from businesses. of also, Total were $X.X our and, product revenue last and QX year. quarter came in he at a lumpy. million very year-over-year. sales last million revenue other growth Brent light, had to TACNAV drop result, quarter had you And $XXX,XXX large year he collectively line and quite order year. as first this said, the of a drop Brent very million. recorded first as as year-over-year a of

the gross our last. revenue million Broadband primarily margin particularly from in decreasing high-margin of increase this was increase mobile inertial inertial connectivity in quarter last $X.X from XX%. both up the year-over-year, and in Revenue navigation due with quarter for mini-VSAT points. million a of from year for benefited increased with service XX%. did That's $X.X sale, $XX.X $X.X decline. margin to first for Service segment this and increase Our percentage the decreased year profit this million revenue By as gross our from was million, $XX.X This a first connectivity first of to good Revenue points consolidated within or not. was was a margin nav a TACNAV X result, revenue. segment, quarter gross $X.X an XX% year. of and by airtime last $X.X driver XX%, XX falls million, million, TACNAV million, percentage or the segment mobile XX%, year increased

a the are As legacy a active Brent XX% subscribers the on in X% quarter over last first our decrease of to grew subscribers subscribers, XXXX. revenue as To network suspended X%. during aren't have of include approximately those boats $XX.X million, typically Total shutdown noted, or explain months. result customers year, up airtime who who despite December recreational that their colder was of XX, the which a difference using suspended, temporarily bit,

to refer have pay they minute. they we services them voice which still to access for While as by suspended, the

In is was XX%, a network, combination shutdown owns margin benefits. for their of of points addition, suspended modest the factors, onetime a to is also monthly pay fee customers of Agile X ago. vessels. that's This equipment on the year due but that number gross the a KVH Airtime legacy from a which up percentage increase primarily

decreased revenue By Going due million, sales. revenue a decline margin shipped. sales. X%, in from first much issues the segment, This quarter as we XX%, of satellite airtime $X.X the decrease supply which high $X.X first was quarter was connectivity Inertial us drop approximately TV could of million, $XX.X or forward, we TACNAV partially in year. driven due chain or a million as target decreased the decrease XXs. have million, in to manufacturing primarily XX%. mobile product for this to Again, continue from to million, product $X.X or $XX.X navigation in the the was prevented by by prior Product

$X.X $X.X year. $X.X business our Operating increased the last quarter by and million. or were inertial up other million, for service was FOG million, the our XX%, revenues nav quarter of For for $XX.X expenses products, first or revenue million OEM nav combined from down inertial by and

in last had in total this force a related had million and $X.X this million CEO matter. retirement. reduction $X.X However, year our costs year, both related Last shareholder expenses legal we in the And year we first a and to significant of amount of we a to quarter. nonrecurring year, had

the As this first such, recurring less of year. $X.X on than last was basis, quarter a million quarter

XXXX million the the in recent on expenses million, less At the from the a full expect and Given to timing income loss of in was compared level, won't of until QX, with million operations than margins first full $X the loss year $X.X between XXXX. million be operating a $X impact these operating revenue, million of the up changes, be of and seen recurring operating changes quarter which $X.X expenses the the changes we in and resulted recorded $X.X basis.

Our segment $X.X million an last our million with operating with profit operating an compared segment $X.X compared million, of of loss million had connectivity an of of for inertial mobile $X.X generated operating operating profit an quarter, $X.X navigation year, the loss last year. while

Our And year. was after million than less to include loss losses unallocated compared operating our $X.X for These mentioned. nonrecurring loss those, operating million, year's last $X.X the $X.X adjusting last expenses million. just consolidated was

compared adjustments first per quarter net with same $X.XX in net amortization as year. unusual a and with last excludes all a and related of last last EPS intangibles, fees, EPS year, the loss CEO a a net For $X.XX those foreign loss net the the $X.X first of period changes quarter non-GAAP costs, for quarter, the of year. million, compared loss stock-based compensation same of $X.XX basis, we per and employee as per with compared million our was a had valuation loss non-GAAP net net and year. the million was share in gains which last other recorded quarter loss was termination for $X.X $X.X nonoperating tax costs same separation, adjustments, after On share, million, of in exchange and $X.X allowance loss other nonrecurring losses, tax transaction first such of our effects the share, and a loss

benefit Our with first adjusted that [$X.X results did. improvement year's year's EBITDA the last for the million], not sale a did positive quarter last year. the TACNAV large quarter particularly was in a a noteworthy compared This have $X.X positive of this is million of that given

sale Net million, year. $X.X ending expenditures which of will driven majority expect our March just operations of full complete operations by financing compared million, resulting balance $XX was $X.X the provided AgilePlan like clear published a earlier Cash non-GAAP in was The comment million $XX.X Capital in I'd last of he an made activities And range $XX we Brent that net quarter the For morning. reconciliation It for release please proceeds for may clarify was that by the have a capital about shipments. million, million radio in refer to the $X.X as this the first $X.X the measures, to not of the the of earnings used expenditures is of cash earlier business. were provided by cash quarter to million be of million. XX. as $X.X been in million. across. was coming from were year, to

supply X% worsen. Looking consolidated assuming ahead, that as adjusted we X% million, $XX expect issues chain between earnings million and our and growth said to we and continue in release, EBITDA be between to revenue $XX annual don't

of and over are year. our positive to Operator for the for turn prepared operating now I Q&A this to concludes we Operator? the targeting morning's half This addition, the second call. the income remarks, the the portion line call still will In of open

Operator

And Instructions] Ric first Raymond we will [Operator question our take James. Prentiss, from from

Ric Prentiss

A instead written radio questions. for had down that $X.X of clarification million. million business. One, I thanks $XX couple the on of

Brent Bruun

part. my caught I'm on glad it. That misstatement was a Roger that

Ric Prentiss

wow. in like, very balance was good But is I your obviously, sheet shape.

that stuff be threats add like strength, part As And analysis want of need that maybe there, is opportunity asset there? like you'd to noncore type out things of is be? at what a or SWOT the might core? you there weaknesses, out that If there those should at look you and guys look sales, other anything you

Brent Bruun

incremental products how And and business that. Headland we'll came that moment. opportunistic We're this LEO the about came mean going then in nothing from and internally juncture, the but up Virtek how we with current best actually up, it, increase we always that as constellation the to position now value Videotel the shareholder that If services, add we're in of can know, Media. something you went. Headland Media, radio evaluating we're keeping our that. talk up comes of at and then think but from we focused services I consider current provide over acquired the things along an that particular and there's lot is and a something on market value-added can that's standpoint years, of there's is one and sort At value with

do We have sort what the internally. ability we'll to to develop need of that

but as and the network there's tracking one anything the have don't of on staying any are potential that, going that's about needs of think operate So do to certainly to that what think need we a that is obviously out up things sort ability around go we're the LEO something that you I forward, and on.

Ric Prentiss

to some is of maybe kind thinking? design be a LEO, like that from you're some That'd or make what you're able acquire antenna signal to sure things

Brent Bruun

Exactly.

Ric Prentiss

makes rates, cycles around That little past how concern us, a this turn might bit concern lot sense. recessionary we has the time, Can performed a interest also around you've into supply business the us of lot world? you a will about more there's update about business Obviously, a that and good tip a world recession Brent, environment. A Great. and update you've kind been long about of seen Okay. recessionary into what in of the part chain. inflation,

Brent Bruun

and particular, a because COVID, of increase of going, we the just airtime revenue, experienced in of actually crewmen other some really because needing had that the we don't with be impact recessionary to back was service recurring XXXX-XXXX, in lot, the we a to with revenue board there's if Prior most on that, when nice which year-on-year typically we've an the had vessels. briefly impacts haven't And business, actually and saw truly the since direct thing imploded to significant correlation up completely. launched business, periods growth. we of service than business. it's business, on recurring a in business the see the where we and know I RV And in Well, the RV And there the that our particular, the about was saw the leisure impact side model. revenue the

and sales So have revenue. we in what significant could anticipate far as a I recurring that's of impacted. But to marine seen won't -- be any past. from as in a And impact the particular, leisure into our those hardware,

Ric Prentiss

Okay. things different is that And see attractive a then little to about on little PIC a more equipment were one of looked maybe the from pressure chip. areas, offset possibly understand maybe with you equipment of kind where the Help little bit having source forward. to us quarter bit expecting that margins, supply margins, chain, given a going we the

Brent Bruun

is as in some giving I talked direct May, it But necessarily that the would stuff what Roger into our Well, here the what chain, with experienced, to on which to see and about need be, in within as challenges forward but We're move continuing we think a And to definitely past. year. not price margins price we a in as TV than script. source pressure some I some responded, add. our with to had we And we concern regard in far did the we're at we increase pressure. higher components has pricing guidance products definitely supply my we particular, have and a

Roger Kuebel

I an say of pay this prices, was be, not an definitely going impact, as QX thought it's that, from just the an we was into a you of after woods still as if that we yet. to actually higher the of I in it are wasn't hard QX big to to but see impact going say couple going of and we days, to as QX, the but I big digging impact out have on this are wasn't last terms do look of in at to what in [pure], was

Ric Prentiss

so pressure. it, it's costs what maybe still Okay. all far That's thought We as should impact a into but were was those we we little coming delayed -- thinking, just too. some expect as it

Roger Kuebel

Yes.

about the get from of it when find little when first quotes, impact it. The hits out. actual kind you You of financials is out find bit delayed a you the sort

that know going there a we was in QX. be to So QX there's than in impact bigger

Ric Prentiss

Gotcha.

still one chatted I search? days a last update update thoughts looking initial the was external. well an would for XX Or I take as the And think both when CEO ago, as like internal to the search XX the me. process? year-end the we the XX was CEO little results, Okay. then that maybe think Any on it search, on on days? just and more, obviously about Is

Brent Bruun

place say they're of soon. the search board that the recruiting on for external the somewhat I process, process. Well, and candidates. continuing assess outside it what is. And internal the end I'm certain firm and date an with can't will directors still working is to that they're hopeful continuing take both

Operator

And our Analytics. Quilty next question is coming from Chris Quilty, from

Chris Quilty

you of or as I of getting in macro quarterly give seeing your commercial trends and higher terms a customers what Do overview you what hoping balance worse on terms the do continuing us situation of year, imply expect some movements through shipping the side? And costs could the was getting out of up. in any containers does Obviously, market. on fuel in better a maybe large intermodal stacked see uptake? basis? look Overall, customer the that you you're for you the countervailing perhaps

Brent Bruun

if impact as But But backed consumption transport I ports. with think industry they're issue. a both within what's as in couple it's a there, definitely industry, fuel our maritime was and there to certain communications, far going in communications, even [Indiscernible] companies the far product, Chris. the up still as of a those require shipping as on questions from needing

to fuel companies they very of it's from They're you perspective, being that's the And spend all money gas of from positive means the some sector. our at benefiting that see as pump. on which communications. far earnings actually have some although more customers, us released pricing, their the As in hurting are energy

Chris Quilty

think energy in I sector past, subscriber the base? given now, you've terms your the of in is percent What

Brent Bruun

this reassessment, changed very I that is go that, check do to to don't are the energy of after percentage think I sector have But the in believe it's range. vessels I'd XX% a associated that call, XX% number double I'll and much. the the probably with and

Chris Quilty

And Gotcha. expect... you would

Brent Bruun

We'll confirm that.

Chris Quilty

good, where commercial just constructive KVH there particular you're give on? on question, sectors any are is a And Watch? That's update most And as if you, magnitude. of on, you order this can a is can us quick there any, an separate

Brent Bruun

look Well, not it's energy, at the on when tankers necessarily basically it's and you movement rigs. and We're supply vessels.

So with be moving it's to regard exception tankers cetera. products. everything We're that fuel, could revolves with core It have around our it going the tugs, we KVH vessels, the Watch, rigs. the it integrate service. of energy sector, be supply In to could the et

XXXX if would Intervention able as won't the time and probably but to Watch, Cloud to well subscribe Connect, KVH you So Remote KVH that until frame. Expert be integrated customer, we'll as you're Flow, be also a both where integrate,

Chris Quilty

new forecast? that I think, the we several into Gotcha. indicated, And costs you presumably, associated baked integration year, products and, should call the had your expected including expect in that to last with KVH that are R&D Watch. When of the this you you that had any of launch

Brent Bruun

information in those regard more initiatives XQ. types release We'll in of to

Chris Quilty

autonomous trucking. gears, shifting And Great.

forward have or and actually think some more of maybe adopted when these some Do think see a those in you I might had customers. in move a was, get you might in to we a past sense I customers? it programs expect dozen potential material When meaningful way? mentioned, of the movement

Brent Bruun

-- think in some year and see Well, comparison to car, year next could get I don't a I latter relatively into year, the see it's a as we of next think like movement. we driverless part this we'll significant think but it's uptake I soon.

Chris Quilty

And you the I that delays in you're Great. remain Or not any tracking the on forecast, see? track? but TACNAV know that all is existing programs

Roger Kuebel

significant programs of out there. a there's Well, number

you expect, we going ahead it's a that a so what of And are defense business. a some as little little behind. would expected, Overall, some there's

end actually year. Europe, that's sort would everything last uptick because our I of seeing so in on an of, last expectations we're year, versus And were say, what going of

Chris Quilty

any light next the And have to months? that potential to XX of come the in those

Roger Kuebel

Yes.

Operator

Needham. the take will Koontz, we from Ryan And from next question

Ryan Koontz

again. color ask cost price impacts about versus there parse your more supply I want that transient would Maybe be impacts chain between of you kind expedites there a price your can helpful. changes to types out of the Roger, And probably increase. of if permanent bit drove

Roger Kuebel

we've things you as done said, them, the freight also and getting last like costs. costs, this sort minute to have we're then of product had So And big long we've where at is we --? is this ship we've and stuff the last this got of going there. is and to any the this how out is Or huge question, is question this permanent? kind And is of like got

a I had had things, of long the don't expected on on sort to how based sort it's I last. I So QX going QX companies. think is It's for more be go issue around -- the perspective. heard front unknown of an what daily parts have to battle for a on a answer us, chips a as from it cost it But it's of probably Again, big it's year bunch but impacts that this going in weren't we chips just of and boards of as is to those bad in an into. kind as trying about for

Ryan Koontz

Sure.

closer it like company? was terms would the kind So in XX/XX you the the to that cost of books quarter of impact here the to in in say

Roger Kuebel

you say of [Indiscernible] sorry. what? I'm XX/XX, When

Ryan Koontz

from price the kind increases and of transient Between source. costs

Roger Kuebel

inflation, increases that chips to used the be the XXX last to And then a is mean, ago. price. couple as of buy not underlying it transient the going could And say I you of when world a well. sort suddenly, you're tends which the fact what of that to XXx of so price go trying in transient, there's a things on exist away. be Well, out real There's year there. the quote particular

some those kind they So while hoarding I because view XXx stop are than and of little scalpers they cost, think will going not before. catch maybe bit we normal, that's hopefully to necessarily wouldn't permanent, a but before, or were a higher product that to go things the as what up will of some back supply point at were

Ryan Koontz

know then of Got are Are And that let process? All us product gears, entering you Or process kind it. the of that you beginning of can you where in right. maybe divestitures? still shifting the middle of process? of evaluating kind in different the

Brent Bruun

a now, most radio noncore. the business was was one the that business, good Right business, and solid a very

at or actually line. product lines As business as there's businesses, we're services product such no particular within as look our alone stand far focused that remaining that, different our on. to may we But

Operator

And for I the have like as turn or any we remarks. closing conference to further speakers questions, additional our no back to would

Roger Kuebel

that's We the thank drive appreciate hard on towards think being participation working keep we're to Operator, going all. I everyone's you. to And profitable. call.

Brent Bruun

Okay. Thanks day. Have a good everyone. much, very Great.

Operator

concludes disconnect. Thank now and you call. participation, This your you for today's may